Illinois AG to file suit against Countrywide Corp.

By Chris Rizo | Jun 25, 2008

Lisa Madigan (D)

SPRINGFIELD, Ill. (Legal Newsline)-The latest legal salvo to hit embattled mortgage lender Countrywide Financial Corp. will come today from Illinois Attorney General Lisa Madigan.

The Democratic attorney general's office has been investigating Calabasas, Calif.-based Countrywide Financial since last fall. The office now says it has gathered enough evidence of wrongdoing to file a lawsuit against the company and its CEO Angelo Mozilo.

Madigan's office says it plans to file the lawsuit today.

Countrywide engaged in "unfair and deceptive practices" in the sale of mortgage loans by loosening its lending standards, structuring loans with "risky features" that landed struggling homebuyers in foreclosure, the lawsuit alleges.

The complaint says the company also provided incentives to its employees and mortgage brokers and designed its pay scale to push loans regardless of whether homeowners had the ability to meet the terms of the loan agreements.

The complaint says investor demand and secondary market valuation "became the primary concern when determining what kinds of loans to market and sell and at what price, rather than the consumers' ability to repay the loans."

From 2004 through 2006, Countrywide was the largest mortgage lender in Illinois. The company sold about 94,000 loans to consumers in the state, the complaint said.

The civil suit asks for an unspecified amount of monetary damages and requests that Countrywide be required to either rescind or reform all of the questionable loans it sold from 2004 through the present.

For its investigation, the attorney general's office said it interviewed about 30 former Countrywide employees and mortgage brokers and combed over more than 110,000 pages of documents.

Countrywide shareholders are expected to vote Wednesday to approve the purchase of the company by Charlotte, N.C.-based Bank of America Corp., as part of a takeover announced in January.

From Legal Newsline: Reach reporter Chris Rizo by e-mail at chrisrizo@legalnewsline.com.

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